The Impact on IPO Performance of Reforming IPO Allocation Regulations: An Event Study of Shanghai Stock Exchange A-Shares
AbstractInitial public offerings in China are distinguished from IPOs in other markets by their extremely high abnormal initial returns and so-called 'Chinese Characteristics'. We examine the effect on IPO underpricing and short-run performance of significant changes in Chinese IPO regulations implemented in May 2002. The significant event was a regulatory change in the method of allocating IPO shares. Event study analysis reveals that abnormal initial returns decreased by 43.3% after the change in regulations, that beta risks of the IPOs increased and that an evenly-upward trend of cumulative abnormal initial returns was reversed to become evenly-downward. The results appear to be consistent with Information Cascades (Welch 1992) and Bandwagon (Ritter 1998) models of underpricing.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2009_04.
Date of creation: Feb 2009
Date of revision: Feb 2009
Contact details of provider:
Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
More information through EDIRC
IPO underpricing; IPO allocation; Policy impact; Chinese stock market; Shanghai Stock Exchange A-shares.;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-CNA-2009-02-28 (China)
- NEP-TRA-2009-02-28 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1988.
"The Survival of Noise Traders in Financial Markets,"
NBER Working Papers
2715, National Bureau of Economic Research, Inc.
- De Long, J Bradford, et al, 1991. "The Survival of Noise Traders in Financial Markets," The Journal of Business, University of Chicago Press, vol. 64(1), pages 1-19, January.
- De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1991. "The Survival of Noise Traders in Financial Markets," Scholarly Articles 3725470, Harvard University Department of Economics.
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann,, . "The Survival of Noise Traders in Financial Markets," J. Bradford De Long's Working Papers _123, University of California at Berkeley, Economics Department.
- Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
- Mok, Henry M. K. & Hui, Y. V., 1998. "Underpricing and aftermarket performance of IPOs in Shanghai, China," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 453-474, November.
- Reilly, Frank K., 1973. "Further Evidence on Short-Run Results for New Issue Investors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(01), pages 83-90, January.
- Paul A. Gompers & Josh Lerner, 2001.
"The Really Long-Run Performance of Initial Public Offerings: The Pre-NASDAQ Evidence,"
NBER Working Papers
8505, National Bureau of Economic Research, Inc.
- Paul A. Gompers & Josh Lerner, 2003. "The Really Long-Run Performance of Initial Public Offerings: The Pre-Nasdaq Evidence," Journal of Finance, American Finance Association, vol. 58(4), pages 1355-1392, 08.
- Su, Dongwei & Fleisher, Belton M., 1999. "An empirical investigation of underpricing in Chinese IPOs," Pacific-Basin Finance Journal, Elsevier, vol. 7(2), pages 173-202, May.
- Susanto Basu & David Li, 2000. "A Theory of the Reform of Bureaucratic Institutions," Econometric Society World Congress 2000 Contributed Papers 1271, Econometric Society.
- Poon, Winnie P. H. & Firth, Michael & Fung, Hung-Gay, 1998. "Asset pricing in segmented capital markets: Preliminary evidence from China-domiciled companies," Pacific-Basin Finance Journal, Elsevier, vol. 6(3-4), pages 307-319, August.
- Loughran, Tim & Ritter, Jay R. & Rydqvist, Kristian, 1994.
"Initial public offerings: International insights,"
Pacific-Basin Finance Journal,
Elsevier, vol. 2(2-3), pages 165-199, May.
- Chan, Kalok & Wang, Junbo & Wei, K. C. John, 2004. "Underpricing and long-term performance of IPOs in China," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 409-430, June.
- John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02.
- Stoll, Hans R. & Curley, Anthony J., 1970. "Small Business and the New Issues Market for Equities," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 5(03), pages 309-322, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Edwards).
If references are entirely missing, you can add them using this form.